US Treasury Yields Hit 4.97% Amid Global Recession Fears
The US ten-year Treasury yield reached 4.97%, driving a sharp sell-off in global equities. Australian markets fell for a fourth consecutive day on rising borrowing costs and oil prices.
The US ten-year Treasury yield rose to 4.97%. This is the highest level since 2023. Rising bond yields increased the global cost of capital. Investors sold equities to seek safer assets. The Australian share market fell for four straight sessions. The ASX 200 index dropped 78.2 points on Friday. The index closed at 8741.20 points. This represents a 0.9% weekly decline. The index is now 11% below its February record high. Seven of the eleven sectors finished in the red.
Brent crude oil prices reached US$108 a barrel. This is the highest level in four months. Tensions between Iran and the US escalated. Missile attacks hit energy facilities in Jordan and Saudi Arabia. These events disrupted crude production. Higher oil prices fuel inflation concerns. Central banks are now expected to raise interest rates. The US Federal Reserve is predicted to hike rates by 25 basis points. The target range would become 3.75% to 4.0%. This would be the first increase since July 2023. Rising rates pressure government debt servicing costs worldwide.
Mining and Tech Stocks Face Pressure
Copper prices fell by 5% during the week. BHP shares dropped 4.1% to $60.87. Rio Tinto shares declined 3.5% to $168.30. Fortescue shares fell 3% to $16.67. Copper-only producers suffered larger losses. Sandfire Resources shares dropped 5.4% to $21.26. Capstone Copper shares fell 8.1% to $14.60. Gold prices also declined. Northern Star Resources shares fell 2% to $22.08. Evolution Mining shares dropped 2.4% to $14.00. Technology stocks faced selling pressure from higher interest rates. WiseTech Global shares fell 3.8% to $32.69. NextDC shares dropped 2% to $12.06. Appen shares declined 3.5% to 97 cents.
Banks Rise Amid Sector Divergence
Financial stocks provided a partial offset to the broader decline. National Australia Bank shares rose 2.7% to $38.72. ANZ shares increased 1.7% to $37.27. Westpac shares climbed 1.1% to $34.22. Commonwealth Bank shares gained 0.7% to $154.19. Positive broker upgrades supported these gains. However, GQG Partners shares fell 9.5% to $1.10. The fund manager lost US$7.2 billion in assets in August. CEO share sales also weighed on specific stocks. Stockland shares dropped 3.1% to $4.09. CEO Tarun Gupta sold nearly $3.8 million in shares. Alkane Resources shares fell 1.6% to $1.86. CEO Nic Earner sold $3.89 million in shares.
Central Bank Decisions Define Outlook
Market focus shifts to central bank actions next week. The Federal Reserve decision is critical. Inflationary pressures from the Middle East conflict remain high. Jerome Powell leads the Fed despite political pressure. The bond market reaction signals a hawkish stance. Higher rates will impact government debt sustainability. Investors are repositioning portfolios for a higher-cost capital environment. The combination of oil prices and yields creates recession risks. Equity valuations face continued compression. GN auto markets/bonds: bond trading notes the shift in global sentiment. The era of cheap money is ending. Disciplined risk management becomes essential for investors.
